Broker Probe Highlights Dereg Dangers, Hunter Says

By Arthur D. Postal, Washington Bureau Chief

NU Online News Service, Nov. 16, 4:11 p.m.EDT?Robert Hunter, the director of insurance for theConsumer Federation of America, told a Senate panel today that thelesson of insurance brokerage investigations is that Congress muststop considering bills that weaken consumer protections.[@@]

"We urge Congress not to enact proposals championed by powerfulsegments of the insurance industry and the leadership of the HouseFinancial Services Committee that would deregulate insurance," saidMr. Hunter, who is also a former insurance commissioner.

The most prominent of these proposals is a "discussion draft"released earlier this year by Reps. Michael Oxley, R-Ohio, andRichard Baker, R-La., chairman of the Financial Services Committee,and its key Capital Markets Subcommittee, respectively, hesaid.

"This proposal increases the federal role in insuranceregulation while overriding many of the most important consumerprotections that exist at the state level, such as the regulationof insurance rates," Mr. Hunter testified.

"This would leave millions of consumers vulnerable to pricegouging, as well as abusive and discriminatory insuranceclassification practices," he said. He said such legislation "wouldalso encourage a return to insurance redlining, as deregulation ofprices would include the lifting of state controls on territorialline drawing."

States would also be helpless to stop the misuse of riskclassification information (for pricing purposes), such as creditscores, territorial data and the details of consumers' priorinsurance history," he said.

"The draft bill goes so far as to completely deregulatecartel-like organizations such as the Insurance Services Office andthe National Council on Compensation Insurance, while leaving thefederal antitrust exemption fully intact," Mr. Hunter said.

Mr. Hunter was a member of the second of two panels thattestified on "Insurance Brokerage Practices, Including PotentialConflicts of Interest and the Adequacy of the Current RegulatoryFramework" before a subcommittee of the Senate GovernmentalAffairs. The oversight hearing was convened by the Committee'sSubcommittee on Financial Management, the Budget, and InternationalSecurity.

Other lessons from the probe by New York Attorney General EliotSpitzer, Mr. Hunter said, are that Congress should:

? Consider a federal minimum standards bill for states toenforce.

? Restore the Federal Trade Commission's authority to protectinsurance consumers from fraud

? Repeal the insurance industry's antitrust exemption.

Mr. Hunter also said Congress should require transparency soconsumers can compare insurance products.

But, even with good standards, a federal approach is fraughtwith risk, "given the lack of federal insurance regulatoryexpertise and the strong possibility that sooner or later anyfederal regulator would be subject to the same kind of regulatorycapture that has occurred at the state level," he said.

"Thus, it is essential that any federal approach mandate strong,well-funded structures to represent the needs of consumers," Mr.Hunter said.